A Carbon Debit Mechanism A Carbon Debit Mechanism to Reward Climate Justice to Reward Climate Justice

& Challenge Conflict of & Challenge Conflict of Interest among MDBs, Interest among MDBs,

ECAsECAsDaphne Wysham,

Institute for Policy Studies, Washington, DC USA

IACC Conference, Athens, Greece

November 1, 2008

Need is Greater than Existing Need is Greater than Existing FinanceFinance

AdaptationAdaptation $86 billion each year by 2015 (UNDP)$86 billion each year by 2015 (UNDP) Current adaptation funding <$100 Current adaptation funding <$100

mil/yr (most as grants <$1 mil)mil/yr (most as grants <$1 mil)

Mitigation Mitigation (incremental cost for low-carbon path)(incremental cost for low-carbon path)

Globally, all sectors: $100 to $200 bil/yrGlobally, all sectors: $100 to $200 bil/yr South, power sector: $30 to $40 bil/yr South, power sector: $30 to $40 bil/yr

Public Investment Best OptionPublic Investment Best Option

Time is as critical as money--time is Time is as critical as money--time is running short to bring GHGs under running short to bring GHGs under controlcontrol

Carbon markets are proving volatile, Carbon markets are proving volatile, not financing clean energy fast enough, not financing clean energy fast enough, rewarding dirty industryrewarding dirty industry

Public finance can be mobilized quicklyPublic finance can be mobilized quickly Public investment needs both a Public investment needs both a

“carrot” and a “stick” for climate “carrot” and a “stick” for climate change finance (not just a carrot)change finance (not just a carrot)

Extractive Industries Review Extractive Industries Review recommendations to WBGrecommendations to WBG

Get out of coal immediatelyGet out of coal immediately Get out of oil by 2008Get out of oil by 2008 Rapidly phase out of gasRapidly phase out of gas Ramp up investments in renewablesRamp up investments in renewables Adopt core HR, labor standardsAdopt core HR, labor standards FPIC for Indigenous PeoplesFPIC for Indigenous Peoples WB board voted to ignore most of EIR WB board voted to ignore most of EIR

recommendations (2004)recommendations (2004)

Problems with carbon market as it Problems with carbon market as it is implemented under WBGis implemented under WBG

Lack of transparency makes it hard to Lack of transparency makes it hard to verify additionality, integrity of projectsverify additionality, integrity of projects

Most of the CERs come from HCFC Most of the CERs come from HCFC destruction in Chinadestruction in China

Less than 10% of carbon trades support Less than 10% of carbon trades support clean energyclean energy

Dirty industry dominates, with 75-85% of Dirty industry dominates, with 75-85% of credits going to coal, steel, other energy-credits going to coal, steel, other energy-intensive industries.intensive industries.

Poverty alleviation is lowest on the list of Poverty alleviation is lowest on the list of priorities, accounting for less than 10% of priorities, accounting for less than 10% of all projects.all projects.

Problems (cont.)Problems (cont.)

Perverse incentives for dirty industries is Perverse incentives for dirty industries is growinggrowing

Indigenous peoples are the last consulted Indigenous peoples are the last consulted when dealing with carbon credits for forestswhen dealing with carbon credits for forests

WBG continues to invest in fossil fuels, forest WBG continues to invest in fossil fuels, forest destruction (i.e. cattle ranching in Amazon)destruction (i.e. cattle ranching in Amazon)

WBG not consistently enforcing its Social and WBG not consistently enforcing its Social and Environmental Safeguard Policies, although Environmental Safeguard Policies, although these are supposed to be mandatorythese are supposed to be mandatory

Conflict of interest growing for WBGConflict of interest growing for WBG

Key actors in Global Carbon MarketKey actors in Global Carbon Market 1) Governmental bodies—international, national, 1) Governmental bodies—international, national,

statestate 2) Rule makers—for both voluntary and certified 2) Rule makers—for both voluntary and certified

markets in carbonmarkets in carbon 3) Banks3) Banks 4) Carbon brokers/traders4) Carbon brokers/traders 5) Utilities, energy companies, energy consumers5) Utilities, energy companies, energy consumers 6) Businesses that generate non-CO2 GHGs ( i.e., 6) Businesses that generate non-CO2 GHGs ( i.e.,

methane, nitrous oxide, HCFC-23, etc.)methane, nitrous oxide, HCFC-23, etc.) 7) Logging companies, Farmers7) Logging companies, Farmers 8) Environmentalists8) Environmentalists 9) Indigenous Peoples9) Indigenous Peoples

Conflict of interest for WBGConflict of interest for WBG Pollution Control and Abatement Handbook is Pollution Control and Abatement Handbook is

Standard-setter for MDBs, ECAs, Equator Standard-setter for MDBs, ECAs, Equator Principles (large private infrastructure finance)Principles (large private infrastructure finance)

Extractive industries most profitableExtractive industries most profitable Does Does notnot count GHGs for fossil fuel, hydro, count GHGs for fossil fuel, hydro,

timber, agriculture, energy-intensive industry timber, agriculture, energy-intensive industry and chemical industry finance it providesand chemical industry finance it provides

Carbon broker (13% overhead)—Carbon broker (13% overhead)—does does count count GHGsGHGs

FCPF broker (30-46% overhead for R-PIN, $6 FCPF broker (30-46% overhead for R-PIN, $6 billion for FCPF)billion for FCPF)

Advising G-8 on climate action plansAdvising G-8 on climate action plans

How to resolve conflict of interestHow to resolve conflict of interest

Define ALL public finance as “additional”Define ALL public finance as “additional” Definition of “additional” under CDM=not Definition of “additional” under CDM=not

business as usualbusiness as usual World Bank claims it is providing finance World Bank claims it is providing finance

that private sector will not provide=not BAUthat private sector will not provide=not BAU Other MDBs make same claimOther MDBs make same claim Export Credit Agencies also supplement Export Credit Agencies also supplement

private finance=not BAU. Also engage in private finance=not BAU. Also engage in carbon marketscarbon markets

All ODA should be considered “additional”All ODA should be considered “additional”

How to structure a Carbon Debit How to structure a Carbon Debit MechanismMechanism

UN’s CDM Methodology Board would create, UN’s CDM Methodology Board would create, oversee Debit Mechanismoversee Debit Mechanism

Debits would accrue to investors (i.e., US Debits would accrue to investors (i.e., US would accrue 17% of World Bank debits)would accrue 17% of World Bank debits)

Carbon debits would have cash value = Carbon debits would have cash value = market price of CO2market price of CO2

Debits would be placed in UN Clean Energy Debits would be placed in UN Clean Energy and Forestry Fund (to be created), Adaptation and Forestry Fund (to be created), Adaptation FundFund

Debits would be paid to poorest of LDCs first, Debits would be paid to poorest of LDCs first, where adaptation need is greatest (i.e., where adaptation need is greatest (i.e., Bangladesh)Bangladesh)

Example: Chad-Cameroon PipelineExample: Chad-Cameroon Pipeline

Project would not have proceeded without Project would not have proceeded without World Bank finance=“additional”World Bank finance=“additional”

GHGs to be released would accrue to all GHGs to be released would accrue to all investors (World Bank, US ExIm, Coface)investors (World Bank, US ExIm, Coface)

Carbon debit would accrue to Chad, other Carbon debit would accrue to Chad, other poor countries for investment in poor countries for investment in adaptation, clean energy, forest adaptation, clean energy, forest preservation, afforestation, using preservation, afforestation, using microgrants, microcredits (like Greenbelt microgrants, microcredits (like Greenbelt Movement of Kenya)Movement of Kenya)

How much revenue would this How much revenue would this create for climate action in global create for climate action in global

South?South?

WBG: 1992-97=1 years’ global GHGs WBG: 1992-97=1 years’ global GHGs (IPS)(IPS)

1997-2008=1 years worth of GHGs 1997-2008=1 years worth of GHGs (WWF)(WWF)

At $10/ton 1997-08 emissions for At $10/ton 1997-08 emissions for WBG investors=$950 billionWBG investors=$950 billion

Additional revenue from all other Additional revenue from all other sources of ODA, ECAs, etc.sources of ODA, ECAs, etc.

For more information:For more information:

daphne@ips-dc.orgdaphne@ips-dc.org

www.ips-dc.org/seenwww.ips-dc.org/seen

www.thecornerhouse.org.ukwww.thecornerhouse.org.uk

www.carbontradewatch.orgwww.carbontradewatch.org

www.fern.orgwww.fern.org